07 September 2006

Comparative oil and gas revenue statistics

Newfoundland and Labrador (2005)

Total oil production: 111,300,000 barrels
Total royalty: $491,526,000

Royalty per barrel: $4.42 [Source: Government of Newfoundland and Labrador]

Alberta (2005)

Total oil production: 219, 000, 000 barrels
Total royalty: $1,447,000,000

Royalty per barrel: $6.62 [Source: Government of Alberta]

Oil sands royalty per barrel: $1.74 per barrel equivalent [Source: Pembina Institute]


1. Alberta's oil fields are mature, well-developed assets. The provincial government's royalty structure reflects the maturity of the fields, applying different rates of royalty depending, among other things, on the age of the field.

2. Alberta's 2005 total estimated revenue from oil, natural gas and oil sands was approximately $14 billion. Natural gas represented the largest portion of that amount at approximately $8.0 billion.

3. Alberta produced approximately 5.0 trillion cubic feet (tcf) of natural gas in 2005. Newfoundland and Labrador's entire natural gas reserves (proven and probable) is approximately 10 tcf.

4. Newfoundland and Labrador's three offshore fields provide revenues based on negotiated royalty agreements. Each agreement provides relatively low royalty to the province until the project development costs are recovered.

5. The Terra Nova project achieved pay-out in 2006. As a result, provincial royalties from that project will be 30% on each barrel of oil. As a consequence, the provincial royalty per barrel (as shown above) will increase substantially as projects move to higher royalties.

6. Memorial University economist Wade Locke noted for NOIA's 2006 conference that the provincial royalties are "profit-sensitive and increase dramatically with the price of oil".

7. Locke also noted that the federal and provincial governments receive more than 50% of the net cash flow from existing offshore production over the life of the projects:

NCF share, by project


Companies: 49%
Province: 27%
Federal: 24%

Terra Nova

Companies: 45%
Province: 40%
Federal: 15%

White Rose

Companies: 46%
Province: 40%
Federal: 14%

8. Hebron was estimated to provide between $8.0 and $10.0 billion revenue to the provincial government over the life of the project. This estimate was based solely on development of the Hebron field with its estimated 500 million barrels of oil. Development of two associated fields - Ben Nevis and West Ben Nevis - would add 250 million barrels of oil to that amount. As a result - and since those fields would likely be brought on stream after project payout - the revenue for the provincial government resulting from Hebron development under the tentative agreement reached in January 2006 would have been substantially increased.

The Hebron estimate did not include development spending, the major portion of which would have taken place in Newfoundland and Labrador.

9. The "equity position" demanded by the provincial government would have provided $1.5 billion in total additional revenue over the life of the Hebron portion of the project. [Source: Premier Danny Williams, comments in House of Assembly]

10. Under the Atlantic Accord (1985), the provincial government establishes its own revenue/royalty regime as if the resources were on land and therefore under the legislative jurisdiction of the province. There is NO requirement that the royalties and other taxation be approved by the federal government.

Clause 37 provides that the province can establish:

- royalties;

- a corporate sales tax that is the same as the taxation applied to all companies within the province;

- a sales tax as generally prevails in the province;

- bonus payments;

- rentals and license fees; and,

- other forms of resource revenue or taxation that may be applicable and that are generally applied to industries.